This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Don't Trust Bernie Madoff! Invest in What You Know

Stocks in this article: PG KMB MCD JPM CAT FMAGX

NEW YORK (TheStreet) -- The bull market for 2013 was a powerful endorsement for blue chip stocks. Then convicted con man Bernie Madoff re-emerged in the news. The specter of Madoff presents another compelling reason for individual investors to buy publicly traded companies that pay dividends with a history of growth, such as Procter & Gamble (PG), Kimberly-Clark (KMB) and McDonald's (MCD).

Madoff is back again in the media eye due to the penalty of $2 billion that J.P. Morgan (JPM) has to pay to regulators and to his victims. J.P. Morgan was Madoff's primary banker for two decades. It grossly neglected its fiduciary duties in that role. Madoff predicted in an interview in 2011 with the Financial Times that J.P. Morgan would be heavily fined as there were "people at the bank who knew what was going on."

While Madoff was a terrible investor, he was a master at manipulating the financial system and the psyche of his victims. He perpetrated a $65 billion Ponzi scheme.

Allan Stanford, another convicted con man, is now serving time behind bars like Madoff. Stanford used to prey on the greed of his victims by promising high returns. He stole $7 billion. By contrast, Madoff promised slow, steady gains so as not to arouse suspicions.

Both crooks illustrate why investors should buy stocks with a history of increasing dividends for shareholders.

There is no shortage of con artists looking to use the securities markets to take the money of the investing public, both foreign and domestic.

Many publicly traded companies based in China have been found to be fraudulent operations. As detailed in a previous article on TheStreet, Caterpillar (CAT), the world's largest heavy equipment maker and a member of the Dow Jones Industrials Average, had to write down $580 million in 2013 as a result of "deliberate, multiyear, coordinated accounting misconduct" at Siwei, a mining equipment company it bought the year before.

But shareholders have some protection in McDonald's, Kimberly-Clark and Procter & Gamble due to two important principles of investing.

The first is the sage counsel from legendary investor Peter Lynch. Invest in the companies that are doing well in the neighborhood.

Lynch posted an annual return of over 29% from 1977 to 1990 as head of the Fidelity Magellan mutual fund (FMAGX). He contended that consumers had an advantage over the investment community, as they could see what was selling at the local mall. Who else knows better what the consumer wants than the individual making the purchase? That concept provided the basis for his books One Up on Wall Street and Beat the Street.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs